Learn How ACA Subsidies Work

The U.S. government provides federal subsidies for health insurance to qualified individuals to make health insurance more accessible for Americans with lower to moderate incomes.

These Affordable Care Act (ACA) subsidies, sometimes referred to as “Obamacare subsidies,” help reduce the cost of health insurance premiums and come in two basic forms: premium tax credits and cost-sharing reduction subsidies.

As of 2021, even more Americans are eligible for healthcare subsidies, which means you could qualify for a $0 premium health plan.¹

Start reviewing your options with HealthMarkets to find out if you qualify for ACA subsidies, which could lead to lower or zero-dollar premiums. Read below for a quick guide on how these insurance subsidies work.

What Does the Premium Tax Credit Do?

The premium tax credit lowers the monthly insurance plan payment for any of the federal government’s four plan levels: bronze, silver, gold, and platinum. Each level has an increasingly higher premium and lower out-of-pocket costs.

If you qualify for a premium tax credit for a government plan, you can get it at the same time you purchase health insurance and then decide how much of it to apply toward your premium each month. You can also pay the premium each month on your own and then wait to receive your tax credit when you file your income taxes.

What Is the Income Limit for ACA Subsidies?

The income limit for ACA subsidies for individuals is between $12,880 and $51,520; families of four with a household income between $26,500 and $106,000 can also qualify as of 2021 poverty guidelines.² Essentially, your household income should be between 100% and 400% of the Federal Poverty Level (FPL). In other words, in order to qualify for the tax credit, your household income must be one to four times the FPL.³

However, there are other criteria that must be met to qualify for ACA subsidies:

• You can’t be eligible for health insurance coverage through Medicare, Medicaid, the Children’s Health Insurance Program (CHIP), or any other form of public assistance.
• You must be a U.S. citizen or have proof of legal residency.
• You must file a joint tax return, if you’re married
• You can’t have access to affordable health insurance through an employer. The government considers insurance “affordable” if the employee’s contribution is less than 9.83% of their household income (and that contribution doesn’t include the cost of adding family members to the plan). The employer’s plan must also offer the same benefits as the government’s bronze level plan.⁴

How Are ACA Subsidies Calculated?

Affordable Care Act (ACA) subsidies are calculated based on your household income, which can include wages, interest, dividends, Social Security, and other sources. Subsidies for health insurance can also include the income of your spouse and dependents.

What Is a Cost-sharing Reduction?

A cost-sharing reduction is a discount that lowers the amount of money paid for out-of-pocket expenses, which is your share of the cost for things such as doctor visits, lab tests, prescription drugs, and other covered services. These costs come in the form of deductibles, coinsurance, and copayments.

You qualify for a cost-sharing reduction if you have a household income between $12,880 to $32,200 for an individual or between $26,500 and $66,250 for a family of four.²  This means your income falls between the federal poverty line and 250% of the poverty line.⁵  If you qualify, you have to choose a silver plan to get the savings.

If you’re eligible for a discount and enroll in a silver plan, you’ll automatically receive a version of the plan with those reductions (e.g. lower deductibles, lower out-of-pocket maximums, or lower copayments) already in place. Keep in mind: Cost-sharing reductions aren’t tax credits, so you don’t have to worry about accounting for them when you file your income taxes.

ACA Subsidies Require Proof Of Income

To ensure that you receive a tax credit or cost-sharing reduction subsidy for health insurance, you must provide proof of income to the health insurance marketplace within 90 days of completing your application. Documents can be submitted online or via mail. If your income can’t be verified, the amount of your subsidy could change, or you may have to pay the full premium cost of your plan.⁶

If you have a new job and your income has changed, you’ll have to resubmit your proof of income so that the subsidy amount you receive can be adjusted accordingly.

Many different types of documents are accepted as proof of employment for a subsidy for health insurance, including:

• A 1040 federal or state tax return,
• Pay stubs,
• Self-employment ledger documentation,
• Social Security Administration statements, or
• An unemployment benefits letter.

HealthMarkets Can Help

Understanding how ACA subsidies work and finding the right health insurance plan for you and your family can be complex.

The innovative HealthMarkets FitScore® can help you compare your health insurance options at no cost to you. You can also determine if you qualify for a subsidy for health insurance. Simply answer a few brief questions about your insurance needs, and your responses will be used to rank available health plans side-by-side, so you can choose coverage with confidence.

Get your FitScore today.